Neil Wotton. Sr. Vice President Major Projects, Flint Energy Services Ltd GENERAL SESSION. Extreme Margin and Cost Cutting,

Transcription

1 Extreme Margin and Cost Cutting, Maximizing Project Value Beyond Cost Cutting Neil Wotton GENERAL SESSION Sr. Vice President Major Projects, Flint Energy Services Ltd

2 Forward-Looking Information Statement This presentation contains forward-looking statements concerning the Company s projected operating results and anticipated capital expenditure trends and drilling activity in the oil and gas industry. Actual events or results may differ materially from those reflected in the Company s forward-looking statements due to a number of risks, uncertainties and other factors affecting the Company s business and the oil and gas industry generally. These risk factors include, but are not limited to risks and uncertainties described under the heading Risk Factors and elsewhere in the Company s Annual Information Form for the year ended December 31, 2010, and other documents filed with Canadian provincial securities authorities, which are available to the public at Unless otherwise indicated, all financial information in this presentation is in Canadian dollars and in accordance with Canadian generally accepted accounting principles.

3 Flint Energy Services at a Glance $1.6 Billion in Revenue in 2010 $2.2 Billion in Revenue in 2008 Employs 9,000+ people North America Employs 2,000+ people USA 12,000 employees in 2008 Alberta s 8th largest employer (Ranked by AB Venture Business) Best Workplace: Health and Safety 2010 (Ranked by Alberta Venture)

4 Full-Cycle Services OILFIELD SERVICES PRODUCTION SERVICES FACILITY INFRASTRUCTURE / Major Projects MAINTENANCE SERVICES Early cycle Late cycle Upstream Drilling Midstream Production Downstream Refining Transportation, Construction, Manufacturing & Maintenance 7

5 Oilsands Market Trends - CAPEX 30,000 25,000 $ Million CDN 20,000 15,000 10,000 Pre-Economic Turmoil 5,000 0 Source: Oilsands Developer Group Presentation Jan 08 OSDG Data July 10 Adjusted Data

6 Oilsands: Yesterday, today and tomorrow s Market..! High Highly Competitive with available capacity 2010 Available Construction Capacity Low Less Competitive with little capacity Competition High

7 Quantifying Value Customers generally perceive Value in the following way: Results+ Quality Value= Cost+ C.A.C Results: Quality: Cost: C.A.C: performance, schedule and adherence to commitments includes actual quality, safety, level of sophistication the relative cost as compared to alternatives Customer s Access Cost= Client s cost of doing business with you Formula Reference: Value Profit Chain Heskett, Sasser, Schlesinger

8 Customer Value Equation Customers perception of value changes over the life cycle of a project. Different Stakeholders perceive value differently. Projects can be generally described in 3 phases: Award Phase Execution Phase Turnover Phase Results+ Quality Value = Cost +C.A.C Value = Results +Quality Cost+ C.A.C Results Value = Cost + Quality +C.A.C Supply Chain Value Project Mgmt. Value Operations Value

9 Customer Value Equation Example Case: Customer Y 2010 Past Scenario with abundance of Construction Capacity Owners Award Criteria (provided): Technical 10% (Team, Process, Systems, Quality, Competence, etc.) Commercial 80% Safety 5% (Quality) C.A.C 5% Results (10%) + Quality (5%) Value = Cost (80%) + C.A.C (5%) R C + + Q CAC

10 Customer Value Equation Example Case: Customer X Today s scenario in a market that is quickly heating up! Owners Award Criteria (provided): Technical 50% (Team, Process, Systems, Quality, Competence, etc.) Commercial 30% Safety 15% (Quality) Community Involvement 5% Value = Results (50% + 5%) + Quality (15%) + Cost (30%) + C.A.C (~0%) + R C Q CAC

11 Modeling Value Offering Value Alignment: Contractor and Customer X 10 Customer Value Curve 9 Value Score 8 7 Contractor Value Owner Expectations 6 Team: R35% Cost: C30% Plan: R10% Safety: Q10% Local Inv.: R5% Labour: 5% Systems: Q5% Value Criteria (Weigthed by Customer Perception)

12 Modeling Value Offering Value Alignment: Customer X 10 9 Customer Value Curve High Perceived Value 8 Value Score Comp. 1 Comp. 2 Comp. 3 Owner Low Perceived Value 4 Team: R35% Cost: C30% Plan: R10% Safety: Q10% Local Inv.: R5% Labour: R5% Systems: Q5% Value Criteria (Weigthed by Customer Perception)

13 Maximizing Value Commercial Model: Lump Sum Reimbursable/fixed components Align the contract with the market conditions Engineering readiness and Material status Reduce unacceptable levels of Risk transfer Short term vs. Long term: Project Program Mentality Increase Contract s utilization of resources: Labour and equipment Implement Lessons Learned and KPI performance management culture

14 Maximizing Value Alignment of Strategic organizational goals: Contractual Relationship Collaboration Greater collaboration between Owner and Contractor Align the Commercial model Award success

15 Questions Thank You